Technically Speaking

Grains Weak as Summer Winds Down

November soybeans broke below key trend-line support last week with follow-through selling this week. (DTN Prophetx chart)

December Corn:

December corn has been in a persistent downtrend since last summer with the exception of a few weeks of counter-trend rally in late 2019 and mid-2020. Trade last week saw fresh contract lows for the December contract, reinstating the downtrend after one week of corrective trade in late June and early July. Scaling out to a weekly perspective, December corn would appear to be in the fifth and final wave of selling, which began with the highs in mid-July 2019 at $4.23 1/2. Unfortunately, with a contract breaking to fresh contract lows, the market is now devoid of any hard, technical support levels that can allow acceleration to occur. On a bright note, momentum indicators are not accelerating and, if anything, would appear to be bottoming and possibly even diverging from price. This market will remain in a downtrend with bearish exposure recommended until or unless a corrective high of merit can be broken like that from July 24 or July 17. The 50- and 100-day moving averages are also sitting right around the corrective highs from July, making those areas even more technically significant.

November Soybeans:

Last week saw a particularly ugly session from a technical standpoint for soybeans as the contract broke trendline support, which dated back all the way to April. Follow-through selling this week would seem to suggest last week's break below that critical area was not a fluke. The November contract has pushed below the 50% retracement of the $8.31 to $9.12 rally at $8.71 with eyes set toward the 61.8% retracement at $8.62. Momentum indicators like stochastics are weak and trending lower with no hint toward a divergence from price. Price almost always slows before it turns, so if soybeans are going to end the current downtrend, momentum should give clues about the contract doing so. A close back above the Aug. 3 corrective highs at $8.99 3/4 would be required to flip trends higher.

December Chicago Wheat:

In keeping with the weak trade in corn and soybeans, Chicago wheat finds itself inside a strong downtrend, which looks keen to revisit summer lows around $4.79. In looking at wave structure, our eye sees the current segment of the downtrend, constituting wave three of a larger degree five-wave sequence, which began with the highs on July 15 at 5.54 1/2. Wave two followed with a tight, a-b-c corrective sequence, which concluded with the pennant action and breakdown from July 31. With that in mind, it is likely we will see corrective, counter-trend strength as part of a wave four before another round of selling makes a thrust toward contract lows from June. As always, we will be watching momentum indicators for any signs it is beginning to diverge from price. These issues considered, bearish exposure remains advised in the Chicago wheat market until or unless meaningful corrective strength can be posted with an eventual move toward contract lows expected in the days and weeks ahead.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.

Tregg Cronin can be reached at tmcronin31@gmail.com

Follow Tregg Cronin on Twitter @5thWave_tcronin

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